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Farmer fears coming up empty in fight vs. Valero

Pollution and profit drive a years-long battle over the lease of a man's property.

Bill Coyle, who farms near Bennett, stands inside a fenced- off parcel of land where only the pumps and sign of a burned-down gas station remain. He is fighting over cleanup of the land, which he leases to Valero.
( Lyn Alweis, The Denver Post
)

Wheat farmer Bill Coyle has fought Valero Energy Corp.'s attempts to rebuild a gas station on his property near Bennett for nearly three years, claiming Valero polluted the land and violated their contract.

Now Valero, which passed a state evaluation of the property, wants payback. The oil company is seeking from Coyle more than $1 million in profits on gas sales it says it lost since 2005.

An Arapahoe County district judge is expected to rule on the case next month.

Coyle, 54, owns the 6.6-acre parcel at Manila Road and Interstate 70, which sits on the northeast corner of his farm. He rents the property to Valero for $100 a month under terms of a lease he acquired when he bought the land in 2002.

He said he has depleted his savings and cashed out his IRA paying legal and consulting bills. Now he fears he may lose all he and his wife have remaining — the 600-acre farm, and its buildings and equipment, as well as a three-bedroom house on 320 grazing acres east of Kiowa.

San Antonio-based Valero earned profits of $5.2 billion last year on revenues of $97 billion, making it No. 16 on Fortune magazine's list of the largest U.S. corporations. It owns or supplies 186 stations in Colorado under the Valero, Diamond Shamrock and Shamrock brands.

"To them, this is just a revenue maker. To me, it's my property," Coyle said recently, surveying the former truck stop, about 12 miles east of Aurora. "All I want is my property cleaned up.

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At Coyle's urging, U.S. Rep. Diana DeGette, D-Colo., asked the Environmental Protection Agency this month to investigate the case and report back to her. EPA spokeswoman Wendy Chipp said the agency received the letter and is looking into it.

Valero spokesman Bill Day said of the case: "Valero is in full compliance with Colorado and federal environmental regulations pertaining to the site in question."

A lopsided standoff

The lopsided standoff began in November 2005, when a fire destroyed the four-decade-old station house. An 18-year-old man was arrested and convicted of starting the blaze.

Valero entered the lease in 2001 when it bought Ultramar Diamond Shamrock Corp. The lease was signed in 1967 by the previous landowner and Stuckey's Inc., and it was later extended through 2027. Coyle said he had suspected since before the fire that the leased property was contaminated by gas spills. He also was not satisfied with the financial terms of the lease, according to court documents. Coyle said in a Nov. 30 affidavit that the market rate for the property was as high as $15,000 per month.

Coyle refused to sign off on Valero's plans to rebuild, contending that the lease required Valero to build a structure identical to what burned down. The building was originally a Stuckey's Pecan Shoppe.

Valero sued Coyle in November 2006, claiming breach of contract. The company said in filings that Coyle is blocking its plans in an effort to "extract more money" from Valero. Company attorney Michael Brice Sullivan said during opening arguments of a three-day trial last month that damages exceed $1 million.

"The margin on gas has increased (since the fire), which is a favorable condition for Valero," Sullivan said. "We could have had a temporary building up in March 2006 and a new building up in late 2006 and be making even more profit than we had been making before."

There had been several spills on the property. The Colorado Division of Oil and Public Safety, or OPS, a unit of the state Department of Labor and Employment, documented two surface spills and one tank leak there since 1991, including a 100-gallon diesel spill in February 2002.

Valero and previous leaseholders adequately cleaned up in each case, giving Valero the right to rebuild on the property, said Laura Smith, who heads the OPS's remediation section.

But Coyle hired his own environmental consultants, one of whom disputed the state's findings. OPS based its decision on work performed by a Valero environmental expert and site visits by OPS agents.

Coyle's consultant, geologist Andrew Schmeising of Talus Environmental Consulting of Lakewood, said Valero's testing, done before the fire, was flawed. The company misplaced monitoring wells — which should be downstream — resulting in inaccurate measurements, he said.

Nonetheless, at one of those wells, Talus measured benzene, a carcinogenic chemical found in gasoline, at 16 times the level the state considers safe for groundwater. Ethylbenzene, a potential carcinogen also found in gasoline, was measured at nearly twice the state's groundwater standard.

"The fact that groundwater contamination of this magnitude . . . currently exists on site indicates that there is a source of contamination that continues to leach from the soil to the groundwater," Schmeising wrote in an April 24 letter to Coyle's attorney.

Schmeising said in an interview that he believes there are higher levels of contamination near the underground gas tanks. But Valero would not let him drill within 10 feet of the equipment, saying closer drilling could damage the tanks, he said.

Though the state has given Valero the green light, that doesn't mean Coyle is off the hook for future cleanup costs, Schmeising said.

"If you were looking to buy this property with these levels, I would advise against it without full indemnity from the previous owner (or operator)," he said. "That's a potential problem for the landowner."

He estimated that cleaning up the site could cost more than $100,000.

Conclusions and directions

Smith said OPS scientists reviewed Schmeising's report and concluded he was wrong about the improper well locations.

As for the benzene and ethylbenzene levels, they can exceed the safety standards on the site if they're moving in the right direction, Smith said. Even using Schmeising's measurements, benzene levels have dropped 65 percent since 2000, enough that there is no threat to human health, Smith said.

For gas stations, where some level of contamination is inevitable, Colorado and most other states use models to determine whether contaminants will exceed safety thresholds at property boundaries within 50 years. The site passed those models, she said.

"Yes, there is a small amount of contamination remaining on the site, but it will clean up on its own," she said. "So long as it's a gas station and not some other use, like a day-care center, it's no problem to let it stay in place and degrade naturally."

Coyle said he is not satisfied with the state's response and fears he eventually will be liable for cleanup costs. He's equally unhappy with the court case. The judge disallowed evidence and testimony Coyle believes would help make his case, he said.

Arapahoe County District Judge Marilyn Leonard Antrim did not allow testimony from Coyle on his conversations with former employees of the Diamond Shamrock station about environmental practices on the site, Coyle said.

One of those former workers, Julia Smith, 26, of Watkins, told The Denver Post that she and other employees regularly cleaned up minor gas and diesel spills with an absorbent material that resembles industrial-strength cat litter.

Once the the material was saturated, employees would dump it in a field behind the station, adjacent to Coyle's wheatfields, Julia Smith said. During her employment of four years, ending in August 2005, the station went through four to five bags of the material a week, each weighing at least 20 pounds, she said.

"That's how Valero instructed us to do it," she said. "They had no way for us to dispose of it properly."

Valero declined to comment on specific allegations.

Such waste is not considered hazardous material by the state but should be placed in garbage containers, said Jerry Henderson, an environmental protection specialist with the Colorado Department of Public Health and Environment.

"Solid waste needs to be managed appropriately. . . . Disposing of this material out back would not be a proper way to manage that waste," Henderson said.

Laura Smith, however, said "land farming," or disposing of such waste on land and mixing with dirt, is an acceptable practice after minor spills because it allows most of the chemicals to evaporate. Gas stations are not required to report to the state fuel spills of less than 25 gallons if they're cleaned up within 24 hours, Smith said.

Coyle said he has spent his savings, cashed out his IRA account and drawn down a line of credit to fund his legal battle. In all, he has spent $150,000. He and his wife, Debbie, have four children in their 20s.

He vows to appeal if he loses at trial.

"My wife is totally stressed. I tell her, 'Debbie, I can't turn back,' " he said. "I'm past the point of no return. I have to see this through."

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